Rising food prices add to 'Treasure Island' reputation

Global food prices are increasing, but what does this mean for Irish consumers?

THE PROBLEM OF rising food prices is having a global impact thanks to a heady cocktail of climate change, poor growing conditions in major cereal-producing countries, oil prices reaching record highs, and greater affluence in parts of Asia.

The FAO Food Price Index measures the monthly change in international prices of a basket of food commodities; its August report shows a 6 per cent jump on July.

That’s not the worst of it. It breaks down food by category, and it found that its Cereal Price Index was 17 per cent higher in July than in June, and only 6 per cent below its all-time high in April 2008.

At that time, spiralling prices saw tensions boil over into violence in Haiti, Bangladesh and Egypt, with the World Bank and the IMF issuing dire warnings about the impact food inflation would have on at least 33 other countries in the developing world.

The situation settled as prices fell, but fears that such scenes will be repeated this autumn has led France, the US and G20 president Mexico discussing whether an emergency international meeting is needed. Even if such a crisis meeting takes place, few experts are anticipating much will get done.

“Beyond words, expect little from the G20 on rising food prices,” Simon Evenett, a former World Bank official and current professor of international trade and economic development at the University of St Gallen in Switzerland, warned this week. He accused the G20 of making “a string of broken promises on protectionism, no serious enforcement, monitoring well after the horse has bolted, and a tendency to pull their punches”.

Drought is a big problem in the US this summer, but how the country uses its corn is exacerbating the situation. The US uses 40 per cent of its corn crop to produce ethanol; earlier this month the UN’s food programme called on the US to overhaul its biofuel policies because it says it is more important to grow crops for food rather than fuel.

But what about Ireland? There have been warnings that grain-price increases on international markets will see the cost of poultry, meat and dairy products soar in the months ahead, while tea prices are also under pressure thanks to poor harvests in Kenya.

But should rising commodity prices have a dramatic impact on food prices here? The short answer is no. Grain prices may be up 17 per cent but that does not mean the price of bread will increase by 17 per cent because grain makes up only a fraction of the cost of the product to the consumer.

The Republic has long been an expensive place to eat. According to a recent Eurostat survey, food and drink prices are now 18 per cent dearer than the EU average, and the Republic is the fifth-highest-priced country in the EU for food and non-alcoholic beverages.